Kyrgyzstan's accession to EEU for a year and a half provokes a heated debate between the advocates of economic integration with Russia and its irreconcilable opponents.
And how has it affected the ordinary Kyrgyzstanis? And why again we wanted the best, and you know the rest... 24.kg news agency talked to the economic analyst, ex-chairperson of the Accounts Chamber of the Kyrgyz Republic Elmira Ibraimova.
- Now, many opponents of EEU argue that Kyrgyzstan has joined the Union in a hurry, without analyzing all the risks, and purely for political reasons. Is it true?
- Not at all: before the accession to EEU, the National Institute for Strategic Studies of the Kyrgyz Republic (NISS) has prepared a SWOT analysis of the positive and negative consequences of such a step. There have been considered three planes: economic, social and security.
The main argument of the authorities for joining was: EEU is an access to the market with a population of over 170 million people, easy import and export of goods, in fact, open borders. It involves deep regional integration, growth in foreign direct investment, the development of new technologies. According to experts, investors, when making decisions, would have to take into account the possibility of entering the entire regional market through Kyrgyzstan, and to invest in large-scale projects.
- Why have the expected positive aspects of Kyrgyzstan's accession to EEU not been realized?
- Probably, we should not speak about it in the perfect tense. A year and a half is not so long for the realization of such global challenges. The problem is that we have not even made the first step on this path. Let's consider it point by point.
First, it was assumed that the reduction of tariff and non-tariff barriers would reduce the expenses in the trade. But the issue is not largely resolved. Why? Because our partners in EEU protect their producers, and our government has not yet prepared a system of certification and laboratory examination of the domestic products. Therefore, our wonderful fruit do not get into the Russian markets.
We were sure that our meat, dairy products, fruits, vegetables, honey, garments, jewelry, are well known in Russia for a long time, and it would be not difficult to organize large-scale delivery of these goods, taking this niche on the Russian market.
In fact, the country did not receive any benefits from these commodity headings. Moreover, domestic producers feel powerful dumping by larger and more state-supported producers of EEU countries.
Secondly, it was expected that investors would come to Kyrgyzstan and open new enterprises, focused on export of the above mentioned goods. But in the end we see the opposite effect in exports, and the investors show interest only to the mining industry, but it has been observed prior to the entry into EEU.
Third, during Kyrgyzstan's accession to EEU, there should be preserved duty-free and preferential imports of strategic goods (oil products, gas, grain, chemical products, ferrous and nonferrous metals, timber). Yes, it was preserved, but the margin of suppliers has grown. While the prices have dropped on the other markets of the region, the cost of supplies in our country has not changed, and even increased in some positions.
Fourth, there was expected an improvement in macroeconomic indicators in general, including the improvement of payments and trade balance of the country along with the reduction in re-export. But we can say that the re-export, in particular of Chinese and Turkish goods, has declined, but as there appeared no new productions, the trade balance has decreased both in imports and exports. Its deficit is very essential, all of these affect the exchange rate and feeds the dollarization of the economy of Kyrgyzstan. Today, our balance of payments, as before, is maintained by the migrant workers and the transfer operations in the financial sector.
The undoubted advantage is that favorable conditions for our migrant workers have been created with the accession of Kyrgyzstan to EEU. There has been simplified the procedure of employment, the length of stay has been increased.
All of the benefits listed here are related to the medium and long term regional integration. But, unfortunately, there are not even observed any prerequisites for these advantages. And it is primarily the fault of the government that, instead of active work in this direction, is hoping that the process will run by itself. Anyway, I have such an impression.
- What about the expected negative consequences?
- First of all inflation. Prices will jump because of the cancellation of the simplified customs clearance regime from countries- not members of EEU. I mean Chinese goods. Increase in retail prices due to this factor will be one-time, in the year of introduction of new tariffs. Meanwhile, there has been a short-term increase in prices and only for goods, imported from the third countries.
Budget losses were projected at $ 60 million per year. The main reason is the decline in some sectors of the economy, which can not withstand the competition. In addition, we must not forget about the loss of the money that came to the treasury from the large wholesale markets Dordoi, Kara-Suu, Madina (previously the proceeds from which amounted to 100 million soms per year). There was expected a reduction in payments from entrepreneurs, engaged in shuttle trade. Reduction of employed in these sectors of the economy, obviously, leads to an increase in unemployment.
This alarming forecast of the experts has been worsened by the reduction of customs duties. In 2015, they decreased by 44.9 percent. According to the Ministry of Finance of the Kyrgyz Republic, for the 9 months of 2016 Kyrgyz budget has received from EEU countries the customs duties by 1, 247.6 billion soms less than it had been forecasted.
That is, even conservative forecasts were overestimated in practice.
- As we were aware of the consequences, we would have to take countermeasures. Why did not we do anything?
- The government should have to attend to the mobilization of internal resources, optimization of budget expenses and reduction of the deficit. The government has not done anything as before joining EEU so now. What is now? It will follow the easiest path - sequestration of costs of the so-called unprotected categories. This, in practice, is called underfunding and non-compliance with the budget law.
Despite the critical situation, the government allows itself to implement large-scale, grandiose projects, the purpose of which is only political dividends. IMF recommends to seriously address the fiscal consolidation, taking into account that the foreign debt situation is close to critical.
- Has the government taken any preventive measures to mitigate the growth of unemployment?
- No, it has not. Now businessmen are left alone with their problems. Delinquency on loans is growing, enterprises of small and medium-sized businesses are closed. Banks collect deposits and borrowers go to rallies out of despair.
- Let's return to the question of certification and laboratories...
- The need for modernization of testing laboratories and bringing our sanitary-quarantine, veterinary and phytosanitary controls into compliance with the norms of CU have not been just talked about but shouted by the experts and exporters. What has the government done? Nothing again. As a result, all our products are locked in the republic.
A total of 18 Kyrgyz companies can deliver products to Russia and Kazakhstan. These are 12 dairy processing plants, 3 fish farms, 2 honey suppliers and 1 supplier of meat products. This is miserable amount for agrarian country.
As a result of optimization, there will be 19 out of 28 veterinary laboratories. And all of them are still not ready to certify our products according to EEU norms. That is why our farmers lose their harvest for the second year in a row and can not sell meat and dairy products.
- Do you think that EEU joining was wrong?
- When the issue was considered, the government indicated that almost 80 percent of our exports and re-exports go to EEU countries. It was said that in case of refusal to enter, we would be simply blocked the border, and it would cause more damage than the accession. It is difficult to disagree with it. But as Kyrgyzstan's accession to EEU was inevitable, could it be possible to prepare the republic for the new conditions?